Venue has been hotly debated in bankruptcy circles for years. While the current rules provide significant leeway for a company to decide where it should file for bankruptcy protection, venue reformers believe that the rules should be amended to limit proper venue to the district of the debtor’s principal place of business or principal assets, or in a district where an affiliate has filed for bankruptcy relief when the affiliate owns more than 50% of the debtor’s voting shares. Poking a stick in the eye of the reformers, the recent ABI Commission to Study the Reform of Chapter 11 didn’t recommend any changes to the rules on venue in chapter 11 cases.

So what is the big deal? Most people seem to believe that the debtor, the company in need of restructuring, should get to choose its “home court” for a bankruptcy filing. In some cases that “home court” might be thousands of miles away from the company’s headquarters; in others, it is right down the block. Counsel for the debtor will undoubtedly run through a checklist of important issues for the company to consider for its impending bankruptcy case and decide, based on the laws in the various jurisdictions where venue would be proper, where the company should file its bankruptcy petition. If parties don’t like the debtor’s choice of venue, they can seek to transfer venue and the bankruptcy judge will determine if venue is proper.

While the statistics aren’t disputed that the District of Delaware (Wilmington) and the Southern District of New York (Manhattan) are the venues of choice for large chapter 11 cases, there are sizeable bankruptcy cases filed all over the country. In my 20-plus years of practice, I have been involved in cases from Brooklyn to Honolulu and dozens of courts in between. They are all courts of competent jurisdiction and all venues selected by the debtor.

Based on what we have seen in the venue battles in cases such as Caesars, Energy Future Holdings, Patriot Coal, Hawaiian Telcom, and Winn-Dixie, it certainly looks like the system is working. Therefore, the old adage comes to mind, “If it ain’t broke, don’t fix it.”

Brett Miller is the managing partner of the New York office of Morrison & Foerster LLP, where he is a partner in the business restructuring & insolvency group and co-chair of the distressed real estate group.

The sporadic outcry for reform of the bankruptcy venue statute is unwarranted—the existing law provides debtors with appropriate flexibility to reorganize while simultaneously protecting interested parties. In short, the venue debate is much ado about nothing.

“Reformers” contend that permitting a debtor to file a case in either its state of incorporation, principal place of business or location of the filing of an affiliate inappropriately allows a debtor to file where it has the best chance of getting a favorable ruling on a particular issue. Why is this a problem? Aren’t those same incentives at play when parties negotiate what the governing law of a contract should be? If so-called “forum shopping” jeopardizes the fundamental underpinnings of our bankruptcy system, isn’t there a similar level of danger in the very fact that a single issue could be decided differently depending on which bankruptcy court oversees a case?

There are very good reasons to allow a debtor to file in the state of its incorporation. A company that chooses a particular forum’s law at the outset should be able to choose to have its fate governed by that same forum’s laws when its existence is in jeopardy. Additionally, interested parties know (or can learn) a company’s state of incorporation, so a filing in that arena is within those stakeholders’ contemplation. Requiring (rather than allowing) a corporate debtor to file where its principal place of business is located raises concerns. Many businesses have major operations, employees and stakeholders located across the country or overseas. There could be expensive (and distracting) litigation while parties battle over the location of the principal place of business—likely with the same motivations that are ascribed to so-called “forum-shoppers” in today’s venue debate. Granted, there are undoubtedly businesses for which the principal place of business will be clear, but a rule that only works for some shouldn’t form the basis of federal legislation.

At first blush, restricting a corporate debtor’s ability to file in a venue solely on the basis of a prior filing by such debtor’s affiliate seems to have appeal. However, when one considers the increasingly complex corporate structures underlying businesses that operate nationwide, the impracticality of such a restriction becomes clear. Without being able to avail themselves of the affiliate-filing rule, some companies may have to commence multiple (and potentially dueling) concurrent restructuring proceedings. Far from streamlining the process, creditors could find themselves having to monitor and appear in multiple proceedings to ensure that their interests are appropriately protected.

The bankruptcy code provides for the transfer of venue of a case when the originally selected venue does not serve the interests of justice. Supporters of reform argue that such statutory relief provides insufficient comfort for interested parties because bankruptcy judges infrequently grant motions to transfer venue. However, recent venue-transfer orders belie that position. Furthermore, if judges infrequently grant motions to transfer venue, perhaps that is because only rarely is the originally selected venue not an appropriate forum to adjudicate a company’s reorganization efforts.

There are a few (and in some pundits’ opinions, many) ways in which the bankruptcy code could be amended to better reflect the changing dynamics of corporate restructurings. Diverting legislative, judicial and practitioner focus to changing an already flexible and effective venue statute would truly be a wasted effort in a system that purports to revere efficiency.

Shaunna D. Jones is a partner at Willkie Farr & Gallagher’s business reorganization and restructuring practice. She is based in New York.

When the ABI Commission to Study the Reform of Chapter 11 declined to make a recommendation on venue selection reform this past December, a number of people were surprised and disappointed. Critics of the rules as currently written have a number of issues with them, but generally they say the rules are too broadly scripted. As a result, debtors “shop” for a venue where case law on issues critical to their reorganization are most favorable.

It’s important to remember that in a restructuring only the debtor has a fiduciary duty to maximize recovery for all stakeholders, whereas individual creditors have a duty only to themselves. It’s therefore reasonable to expect that a debtor will select a venue where case law supports its efforts to achieve a successful reorganization. In fact, you could argue that’s exactly what a debtor should be doing. Of course, there are rules prescribing proper venue that must also be followed. But assuming they are, courts tend to defer to a debtor’s choice of venue and have said as much in high-profile cases like Energy Future Holdings and, most recently, in Caesars.

Creditors do have recourse to contest venue decisions, and they can ask that venue be moved if they feel that the debtor’s choice isn’t convenient or just. Critics will argue that such motions are rarely granted, partly because the burden of proof falls to the party asking for the move (and, again, the rules are broadly written).

Interestingly, in Caesars, creditors took it up a notch by pre-emptively filing an involuntary proceeding in their own venue of choice before the debtor could select its venue, in an attempt to shift that burden of proof to the debtor. Ultimately they were unsuccessful. If they had prevailed, it would almost certainly have had a chilling effect on negotiations with creditors for pre-packaged or pre-arranged restructurings, which tend to be more efficient and less costly than traditional chapter 11 cases.

With no reform on the horizon, and creditors getting more aggressive in promoting their interests, this promises to be a likely area rife with controversy for the foreseeable future.

Lisa Donahue is global leader of the turnaround and restructuring services group at business-advisory firm AlixPartners LLP, and is based in New York. Follow her on Twitter at @LisaJDonahue

The venue provisions governing where a company may file a chapter 11 bankruptcy case shouldn’t be reformed. The current venue rules for chapter 11 bankruptcies permit a company to file its bankruptcy petition in the district of its (i) state of incorporation, (ii) principal place of business, (iii) principal assets or (iv) affiliate has already filed. Critics of the venue statute complain that companies use the venue statute to venue-shop their way to courts with favorable precedent, often with an insignificant nexus to the debtors’ business activities. They also argue that the venue rules create venue options that are inconvenient for creditors or other, potentially, smaller constituencies and other stakeholders.

There is no question that a large number of complex business bankruptcies select the bankruptcy courts in the District of Delaware (Wilmington) and the Southern District of New York (Manhattan). Delaware has business-friendly incorporation laws, and the bankruptcy courts in both locations have seen more complex cases, have more experience with complex issues and, perhaps most important, have a proven track record on how they will handle the issues routinely seen in the larger, complex, chapter 11 cases. The financial advisers, attorneys and other professionals advising corporate debtors and their financing sources, large banks, funds and other lending institutions, rely on the experience of these courts as well as their proven track records to better predict how certain complex issues will be treated—and win, lose or draw—to provide their clients with better informed advise. The large volume of cases adjudicated within these two districts encourages further filings which in turn gives these courts even more of a tract record, predictability and specialization.

Neither a debtor nor its lending sources, which sources often condition funding on a particular venue, should be penalized for choosing a venue they believe will foster a better outcome, based on well-developed binding precedent, predictability and experience. Notably, debtors and lenders have the ability to select and hire restructuring professionals of their own choosing—professionals they believe specialized, experienced and competent—and no one challenges this as anything other than appropriate and business-savvy. Simply put, choosing courts and judges based on their experience and reputation for handling complex restructuring issues predictably and well similarly makes good business sense.

Sharon Levine is vice chair of Lowenstein Sandler LLP’s national bankruptcy, financial reorganization and creditors’ rights practice. Follow her on Twitter at @LevineSharon

(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit http://on.wsj.com/DJBankruptcyNews, scroll to the bottom and click “try for free.”)

Lehman Brothers Holdings Inc. collapsed more than six years ago, but the failed investment bank is still paying millions in bonuses to the team winding down its business, DBR reports in WSJ.

Creditors have come to terms with RadioShack Corp. over bonuses top-ranking insiders stand to earn in the weeks ahead, as the retailer attempts to save a slice of its battered collection of stores, DBR (sub. req.) reports.

According to Bloomberg, New York City tenants who file for bankruptcy won’t have to give up their rent-controlled apartments.

The bankruptcy laws that allow companies flexibility in selecting a venue shouldn’t be changed.

The vast majority of bankruptcy filings actually are filed either where the company has its principal place of business or where its principal assets are located. It’s only in larger cases that companies tend to file where the company is incorporated. There are good reasons for this.

The goals of chapter 11 are to reorganize businesses and maximize the return to stakeholders while providing due process to interested parties. In determining where to file, large companies seek to minimize uncertainty. That can best be accomplished by filing in jurisdictions that have well-established precedent on key issues, such as first-day motions. In mega cases, that has been the Southern District of New York and Delaware. Thus, it shouldn’t be a surprise that many of the larger cases are filed there. It should be noted that often times it’s not just the company that wishes to file in these venues but the key lenders also, as they also desire predictability.

Critics of the current venue statute argue that it has led to opportunistic forum shopping and that the venue statute is essentially boundless. These critics ignore the fact that bankruptcy judges do in fact transfer venue of large chapter 11 cases when appropriate—Patriot Coal, Caesars and Winn-Dixie are three examples of that in the Southern District of New York and Delaware. The truth is that venue provisions are very appropriate and do not need to be adjusted.

Jay Goffmanis the global leader of Skadden, Arps, Slate, Meagher & Flom’s corporate restructuring practice. He is based in New York.

The central concern—as viewed by Lynn LoPucki in “Courting Failure, How Competition for Big Cases Is Corrupting the Bankruptcy Courts”—is unbridled competition for cases by both Delaware and the Southern District of New York. Professor LoPucki substantiates the impact of this competition based on historic growth in either court’s market share and argues there is an attendant cost reflected in case outcomes, post-emergence. It is far from clear, however, that this concentration has impaired results.

The volume of cases in these two jurisdictions may simply be self-reinforcing. Over time, caseloads in these courts have served to justify additional judges. This, in turn, affords both courts more cases, experience and corresponding efficiencies. Furthermore, either court is favored by dint of location central to the Northeast corridor, a region encompassing the preponderance of bankruptcy professionals, as well as dominant lenders.

In spite of its significant shortcomings, Prof. LoPucki’s basic thesis warrants concern. Open competition between courts can, by its nature, compromise the legal process. Some measure of regulation might arguably defuse an impression of a legal process prone to manipulation.

A common prescription offered is to eliminate the option of state of incorporation as a basis for venue. Given that over half of public companies in the U.S. are incorporated in Delaware, the implication of this approach is not lost on Wilmington.

Reflecting the ambiRuguities in the debate on venue, even the recently concluded report of the ABI Commission to Study the Reform of Chapter 11 failed to find a basis for venue reform. It’s not clear that these rules are problematic, so don’t apply a fix with its own set of unintended consequences.

Most bankruptcy cases should be heard in forums consistent with current law that are the most convenient and cost-effective for both the parties-in-interest and those most likely to play ongoing roles in chapter 11 case administration.

Particularly in large enterprise chapter 11 cases, the location of the debtor’s principal place of business or principal assets may—or may not—be such a forum.

Given the global nature of our economy, there is usually not one specific location where a corporate family “should” file its chapter 11 petitions. Consider a national- or multinational-company with multiple affiliates incorporated and located in various jurisdictions throughout the country. The company’s employees, retirees, trade creditors, lenders and shareholders (and their representatives) will be spread across multiple jurisdictions. Depending on the industry, the company’s principal assets may be in one location, but the majority of its business, headquarters and counterparties may be in others. Thus, as many courts have held, the location of the company’s assets often has little relevance to venue selection. Or consider a company contemplating a balance sheet restructuring through a prepackaged bankruptcy that will leave its non-financial creditors unimpaired and whose source of financing and affected creditors are located far from the headquarters or principal assets.

In these and other similar scenarios, advocates of venue “reform” would leave the company with only the option of filing for bankruptcy in the state where its headquarters or principal assets are located. This well could be both unfair and inconvenient to parties-in-interest, and it wouldn’t further the purpose of chapter 11. It would also not further the seeming purpose of bankruptcy venue restrictions—the protection of creditors. If that is the concern, companies should be permitted to file their chapter 11 petitions in their state of incorporation—their legal home—if that will maximize value for stakeholders. Indeed, when a company chooses to become a resident of a state through incorporation, and thereby agrees to be governed by such state’s laws, it should be able to avail itself of the benefits that come with incorporating in that state, just as it is subject to the burdens.

To be sure, participation in the judicial process is of utmost importance and should be maximized. However, experience has shown that the most frequent attendees at court hearings are the professionals of the debtor, lenders, creditors’ or retirees’ committees and other material counterparties. These parties, whose presence is most often necessary or required, are often dispersed throughout the U.S. or concentrated in major urban centers. While no single venue location will be the most convenient for all parties, a debtor should be able to consider the expense to the estate if most attendees are forced to travel for all proceeding, the most convenient location to negotiate and formulate a plan of reorganization, and the efficiencies gained by proceeding in a location that has greater transportation and other logistical efficiencies.

It is critical that interested individuals and smaller creditors not be shut out of the process. This is accomplished by the many instances of group representation provided in the Bankruptcy Code through committees and court-appointed representatives. Notably, in certain circumstances, such as Section 1113 proceedings, a debtor is not even permitted to negotiate with such represented individuals and must deal exclusively with the group’s representative, which may well be located in a different state or region than its constituents. Technological advances also allow for participation from anywhere in the country.

In most (though assuredly not all) cases, current law permits a company’s board of directors to discharge its fiduciary duties and further the goals of chapter 11 by choosing a venue from among the statutorily available options that will facilitate a successful reorganization and maximize value for all stakeholders.

Marshall Huebner is a partner with Davis Polk & Wardwell LLP in New York and is co-head of the firm’s insolvency and restructuring Group.

The venue statute effectively allows those filing the case to choose which district’s bankruptcy court will hear the case. That ability to choose leads many firms whose business is located elsewhere to file for bankruptcy in Delaware’s bankruptcy court or in the Southern District of New York.

Is this a bad thing? In two dimensions, it is. Since the choice of where to file is typically made by the debtor’s senior management and its professional advisers, these two have reason to file in a court whose decisions favor their interests—more discretion for managers and more protection from liability for directors. Sometimes a tilt toward their interests makes sense; sometimes not.

Second, bankruptcy court rulings that narrow management’s discretion in sensible ways can push firms to choose to file elsewhere. It’s been said that the Seventh Circuit—based in Chicago—drove filings away due to its tough stance vis-à-vis intercorporate guarantees (eventually overturned by Congress) and critical vendor payments. (Favored vendors, deemed to be critical vendors, are paid in full even if they ranked lower on the traditional priority order and wouldn’t otherwise be paid in full.) Maybe those Seventh Circuit decisions were correct (in my view, they were), or maybe they weren’t. But since management can choose where to file, courts that are tough on management will not hear as many bankruptcies, while the other courts (even if only trying to do what they think is right) will get the lion’s share of the filings.

But in another dimension, allowing the debtor a wide choice of venue can benefit the firm, its creditors, its business and the economy. Managers want their company to move through bankruptcy efficiently, which usually means quickly and with few surprises. Judges who handle big firms regularly see some of the same issues repeatedly and can act more quickly and more intelligently than if the issue is, for them, one of first impression. Lawyers can better predict the path of the bankruptcy. Experience and repetition, in judging as in sports and most activities, makes one better at the job, and with so much of the big firm bankruptcy business focused on Delaware and the Southern District of New York, the judges there are at the top of their game.

Which effects—the negatives or the positives—are more important? It’s hard to tell for sure, but one suspects it’s the positives of specialization. That doesn’t mean we cannot improve on the current setting. Perhaps, for example, an intermediate bankruptcy appellate court below the Supreme Court to reconcile doctrinal differences without an appeal to the Supremes makes sense. But if the choice is narrow—venue only in the company’s principal place of business or the current status quo of wide venue choice—it’d be the status quo that, in my view, should win out.

Mark Roe is a professor of law at Harvard Law School in Cambridge, Mass.

(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit http://on.wsj.com/DJBankruptcyNews, scroll to the bottom and click “try for free.”)

A federal judge has finalized an order for ex-billionaire and Texas entrepreneur Sam Wyly to pay a $198.1 million in fines, after regulators accused him of profiting for more than a decade from hidden stock trades. Read the DBR article in WSJ.

The risk of bankruptcy by Caesars Entertainment Corp.’s biggest unit killed its ability to get a New York casino license, Bloomberg reports.

A jury found that billionaire Ira Rennert used his bankrupt mining company to pay for a luxurious lifestyle, the Associated Press reports.